Falcone gets to keep LightSquared, but SEC bans him from trading

Philip Falcone still believes he can make a network out of LightSquared, so much so that he was willing to accept a five-year ban from the hedge fund industry that made him a billionaire.

The Securities and Exchange Commission said on Monday that it has reached a settlement with Falcone, who first came to the attention of the tech industry in 2010 with a bold, though perhaps half-baked, plan to reuse old satellite spectrum to build a nationwide LTE network. The SEC had accused Falcone of multiple securities infractions, including using $113 million of his investors money to pay his personal taxes, favor certain investors over others when returning their capital, and a “short squeeze” on bonds held by a Canadian company.

In the settlement, Falcone admitted to wrongdoing, agreed to pay an $18 million fine, and accepted a ban from trading for at least five years. But Falcone will get to keep control over the Harbinger Group, his publicly listed holding company, and LightSquared, which is now mired in bankruptcy.

Falcone’s plan was always a speculative one. LightSquared was created to turn old L-band spectrum acquired from bankrupt satellite communications companies into a nationwide wholesale 4G network, selling capacity to other carriers and consumer brands wanting to get into the mobile broadband business. LightSquared and Falcone, however, ran smack into the GPS industry.

The GPS satellite constellation uses a nearby band to transmit its location signals to receivers embedded in phones, planes, cars and every manner of consumer and industrial device. And GPS device makers maintain that there was no way of deploying a large-scale terrestrial LTE network without knocking out millions of navigation and location receivers.

LightSquared sparred with the likes of Garmin, Trimble Navigation and John Deere for more than a year, until the Federal Communications Commission yanked its provisional waiver last year to build its network. Since then it’s been a downward spiral for LightSquared. Falcone has been battling Dish Network Chairman Charlie Ergen for control of the company.

Falcone has fought back by going litigious. He’s not only suing Ergen, but the entire GPS industry, claiming the interference problems between their devices his network was entirely of receiver manufacturers’ making.

Falcone stands little chance of getting this network built, though, unless the FCC gives into his demands to swap out his L-band airwaves for less crowded airwaves. Right now the best chance of seeing a 4G network in the L-band is probably Ergen, who would combine and reconfigure it with Dish’s satellite spectrum.